The competition for Guyana’s offshore oil wealth has brought Exxon Mobil Corp. into a rare public dispute with Chevron Corp., centered on a lucrative contract from a decade ago.
Exxon is ready to challenge Chevron legally to secure a major part of Guyana’s oil riches, aiming to outmaneuver Chevron.
This confrontation could potentially affect Chevron’s plan to acquire Hess Corp., underscoring the significant value attached.
The Guyana project stands out for its massive scale, swift development, and profitability.
A rarity, as major oil firms avoid mega-projects, prioritizing dividends, buybacks over production due to environmental, peak oil demand, investor concerns.
The Stabroek block, Guyana’s main production area, boasts 11 billion barrels of oil.
Exxon plans to double output to 1.2 million barrels daily by 2027, aligning Guyana with OPEC’s Angola.
Profitability Amidst Contractual Disputes
Oil extraction in Guyana remains notably profitable under $35 a barrel, due to a favorable production-sharing contract signed in 1999.
Central to the dispute is a private agreement between Exxon, Hess, and Cnooc over the Stabroek block, featuring a “right of first refusal” clause.
This means that if one wishes to sell their share, the others get the first option to buy.
Exxon’s intent to exercise its rights to Hess’s stake signifies the strategic value of maintaining control over this profitable venture.
Chevron argues this clause doesn’t apply as it aims to buy Hess entirely, not just the Guyana asset—a point Exxon disputes.
The sector’s success has even led Venezuela to renew its claims on the neighboring, rich oil region of Esequibo.